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QUANTILE-BASED ASYMMETRIC DYNAMICS OF REAL GDP GROWTH

Published online by Cambridge University Press:  27 March 2019

Xiaochun Liu
Xiaochun Liu*
Affiliation:
University of Alabama
*
Department of Economics, Finance and Legal Studies, Culverhouse College of Business, University of Alabama, Tuscaloosa, AL 35487, USA. e-mail: xliu121@ua.edu.
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Abstract

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This paper studies asymmetric dynamics of real GDP growth by estimating linear and nonlinear quantile persistence over different parts of the conditional distribution for six major developed economies. Several novel quantile-based hypotheses are motivated in this paper and tested for the steepness asymmetry of real GDP growth that hypothesizes that contractions are steeper than expansions. The empirical results show that quantile persistence is generally high at far lower tails, thus requiring much longer half-lives to reverting negative deviations to the mean of real GDP growth and hence leading to gradual economic recoveries. By contrast, less persistence in far upper tails tends to generate sharp and short economic downturns that adjust positive deviations towards the mean of real GDP growth so as to cause abrupt economic recessions. In particular, this asymmetry in quantile persistence strongly supports the steepness asymmetry conjecture, robust to the presence of structural breaks and potential nonlinearities in real GDP growth.

Keywords

Distributional PersistenceSteepness AsymmetryHalf-livesQuantile Unit Root TestThreshold Quantile Autoregression

Information

Type
Articles
Information
Macroeconomic Dynamics , Volume 24 , Issue 8 , December 2020, pp. 1960 - 1988
Copyright
© 2019 Cambridge University Press

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